Kona Coffee Farm For Sale, Part 114 March 2011

Can you imagine yourself living on a Kona coffee farm in Hawaii? Warm
weather all winter long, sunny days with gentle ocean breezes.
After a hard day's work on the farm you finally have a chance to
relax. The tropical birds are chirping in the distance as you sit
on the lanai, sipping your mai tai and watching the sunset.
Tomorrow morning you will wake to the smell of freshly brewed Kona
coffee that you grew yourself. It's near the end of the season so
tomorrow's work load should be light. A few chores in the morning
then you can spend the afternoon at the beach, fishing on a friend's
boat, golfing at one of the many local courses or maybe just enjoying
your favorite hammock and a good book.

If you've read this blog for long, you'll know that Kona coffee farming
isn't all beauty and relaxation. Still, there are plenty of those
moments. Farming isn't exactly known as a high paying job but
what is lost in potential income is often made up for in improved
lifestyle. For many, it's more than a fair trade.

A few years ago, finding a decent Kona coffee farm for sale was a
challenge. Prices were high and inventory was low. Then the
real estate market crashed. Things quickly changed from a
seller's market to a buyer's market. Hawaii had its fair share of
foreclosures and some of those foreclosures were auctioned off at
ridiculously low prices.

Foreclosures
Last year I mentioned a neighboring Kona coffee
farm for sale. It had gone through foreclosure and was supposed
to go up for auction. That never happened. Apparently the
bank owns the property but it has been stuck in some kind of
bureaucratic limbo. The property has been sitting abandoned this
entire time.

Abandoned property in the tropics doesn't do so well. The coffee
trees are overgrown with weeds and the house is not exactly well
maintained. We hear the occasional ruckus from that direction but
there's nobody living there and nothing left to loot. The house
is home to spiders, geckos and the occasional nesting bird.

If the property ever does come onto the market, it's hard to guess what
the price will be. Even if the bank prices it below market value,
it would still be a challenging investment. I suppose it could be
a good deal for the right person. None of that matters though
because that property is not currently for sale.

Awhile back we were driving up our road when we noticed an Open House
sign with an arrow. It led us to a beautiful million dollar
"coffee plantation" that we never knew was there. The house was
huge and luxurious. There was a swimming pool, koi ponds, fancy
landscaping and a full sized putting green. It think there was
also a small decorative coffee "orchard" but I wouldn't exactly call it
a coffee plantation.

I forget the stated value of the property, I think it was in the range
of $1.5 million. I heard a rumor that it sold for far less.
With the luxurious house and landscaping, it looked like it was worth
far more. It's possible the property sold for cheap but I doubt
it was crazy cheap. We are still in Hawaii and property
around here just can't be found for ridiculously low prices.

Leasehold
That "coffee plantation" was leasehold which is the only reason it was
valued at 1.5 million instead of three or four million. Leasehold
means the buyer would own the house and other improvements (ex: coffee
trees) but not the land itself. Leasehold property is fairly
common here in Hawaii. Much of the land, including our farm, is
part of a huge land trust created by the last Hawaiian princess back in
1884. That trust is managed by Kamehameha Schools / Bishop
Estates (KSBE).

With their history of corruption, KSBE is not exactly known for being
fair and honest. A couple years ago many Kona coffee farmers were
forced out of their existing lease and into new agricultural
leases. Kona Earth is fully planted and productive so we switched
to the new ag lease with only minor issues and a few thousand dollars
in unexpected costs. The owners having a hard time switching
leases are mostly the smaller "farmers" that are living on farm land
but not really farming full-time. That million dollar "coffee
plantation" is the perfect example. If their old lease had
expired and they don't have approval for a new one, that would make the
property a very difficult investment.

Fee Simple
Fee simple is the term for what we think of as normal real
estate: you purchase the land, all its improvements and full
usage rights. Fee simple land is usually far more expensive than
leasehold land. Here is an example of a
$6,750,000 (2008) Kona coffee farm
that is fee simple.

I have some personal experience with the coffee farm in the
video. It is indeed a beautiful place with fantastic ocean
views. The pictures in the video don't really do it justice, it's
even more incredible when standing there enjoying the quiet in
person. As gorgeous as it is though, the property does have its
share of issues. It is steep, rocky and dry terrain which makes
coffee farming a challenge, not unusual for lower elevation farms in
Kona. The various parcels were sold separately and last I heard,
none of them were on the market any more. Nice property never
stays on the market for long. Their farm equipment sold fast
too. I have several inside contacts but I wasn't fast enough to
purchase the farm tractor they were selling.

Insider Information
Even when the real estate market was at its weakest, it was never
easy to find a good deal on a Kona coffee farm. Now that it's
picking up again, it will get even tougher. There are plenty of
bad deals out there, they're easy to find. It's the good deals
that are more difficult to find.

One of our neighbors has decided to put her farm on the market.
Her farm is actually a coffee farm, not a pretend coffee plantation/vacation
home. It has a new 35 year agricultural lease and has no major issues
that I'm aware of. The farm has plenty of coffee and it is all
organic. The coffee won second place in the 2007 cupping competition.

I don't know if the property has been fully listed so I'm not going to
discuss the details yet. I will say that the asking price is
$699,000 for 13.63 acres with a 2 bedroom, 2 bathroom, 1400 s.f. house. I
will also say that although the price may sound high, you get what you
pay for. If you are interested, and it is in your price range,
then this property is definitely worth a closer look. I can
recommend a good real estate agent or two if you'd like. I'll
post some pictures and more details next week.